Mexico | Banxico refrains from hinting a rate cut in February

Summary

Although we continue to think that Banxico should not skip rate cuts at any meetings next year, its cautiousness, hawkishness, and recent hints suggest that consecutive rate cuts are unlikely at the start of the gradual easing cycle.

Key points

• Key points:
• Banxico kept the policy rate unchanged at 11.25% for the sixth consecutive meeting and fine-tuned its headline and core inflation forecasts somewhat to the upside.
• Headline inflation was marginally revised up by 0.1 pp for the last three quarters of 2024, while core inflation is now expected to decline more gradually to 3.5% by 4Q24.
• The statement retained a hawkish tone, as the Board continued to signal that the policy rate “must be maintained at its current level for some time.”
• A “challenging” outlook ahead and the unchanged tone of the statement seems to confirm that the beginning of the rate cut cycle will be gradual.
• We stick to our view that Banxico will likely start to “fine-tune” the monetary policy stance and cut the policy rate by 25 bps to 11.0% in 1Q24.

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